BENGALURU Indian shares surged on Wednesday (Feb 1) after the government raised the minimum tax rebate limit and stepped up spending, while bond yields moved lower after gross borrowing for the next financial year was lower than expected in the Union budget.

The Nifty 50 index was up 1.7% at 17,962.25, while the S&P BSE Sensex gained 2% to 60,724.54 as of 12.58pm IST.

Indian bond yields reversed course after the government announced gross borrowing at 15.43 trillion rupees (US$188.75 billion) for the next financial year and net borrowing at 11.80 trillion rupees.

A Reuters poll had pegged gross borrowing at 16 trillion rupees.

The benchmark bond yield dropped much as 11 basis points from the day’s high levels, while the Indian rupee rose slightly against the US dollar.

Finance Minister Nirmala Sitharaman said the government will spend 10 trillion rupees (US$122.3 billion) on longer-term capital expenditure in 2023/24, extending a strategy adopted to revive growth in the aftermath of the Covid crisis.

She also raised the rebate limit for personal income tax to 700,000 rupees from 500,000 rupees, sending shares higher.

India's federal government cut down the fiscal deficit target to 5.9% of GDP in the next financial year, compared to 6.4% for the current fiscal year.

"On one side, they have reduced taxation, which could lead to feel-good factor in terms of consumption. At the same time, capex investment is very crucial, as it has a multiplier effect for growth," said Atul Suri, chief executive at Marathon Trends PMS, and fund manager, Rare Enterprises.

This is the last full-year budget before the national elections in 2024 and key state elections later this year.

"Running into the elections in little over a year, this budget implies that the government has decided to write the cheques earlier than people expected, which is a positive," Suri added.

Banks and financials were the top gainers among the 13 major sectors, with banks rising 3.3% and financials advancing 3.1%.

India has pegged its economic growth at 6-6.8% in the 2023/24 fiscal year, the slowest in three years, at its pre-budget economic survey released on Tuesday.

Shares of seafood company Avanti Feeds Ltd rose 5.8% and Coastal Corporation gained 4.8% after Sitharaman announced plans to raise spending on the fisheries sector.

Meanwhile, most Adani Group stocks dropped, extending their losses since short-seller Hindenburg Research's report and despite the group completing a US$2.5 billion share sale a day earlier. 

  - Reuters